‘Boom Town’ of Nashville Attractive to Out-of-State Players
- Sep 01, 2011
Nashville, Tenn.—The Nashville apartment market is “moving in the right direction,” reports Scott Tyrone, director of ARA’s (Apartment Realty Advisors) Nashville office.
“Concessions are burning off, rents are going up, occupancy is going up and construction is going up,” he tells MHN.
Average monthly rent was $0.83 per square foot at the end of the first quarter of this year, with Bellevue, Franklin and West End/Downtown achieving higher rents—$0.89 per square foot, $0.99 per square foot and $1.40 per square foot, respectively.
“At the end of 2010, rents were up, but concessions were still there,” recalls Tyrone. “Concessions are down now; in some submarkets they are non-existent.”
In the fourth quarter of 2009, the market reported an average occupancy of 90.2 percent; in the fourth quarter of 2010, the market had improved to 93.3 percent occupancy, and the first quarter of 2011 saw occupancy just below 93 percent. (According to Tyrone, however, fewer units report during the year than they do at year-end.)
Meanwhile, most of the new-construction pipeline is concentrated in Franklin and the West End/Downtown submarkets, says Tyrone. “Franklin has 832 units under construction and they’re about to get another 700,” he notes, adding that most of these units are slated for delivery between the second and fourth quarters of 2012.
“The West End/Downtown market has, officially, under construction 555 units, but what’s not reported is you have at least another 2,000 that are trying to get started,” notes Tyrone. “Not all of those will happen, but they are in various stages of trying to raise equity or debt. Those are sites that are under contract, optioned, that people are trying to put deals together on.”
In terms of the investment market, 1,191 units traded in the first quarter. Most notably, says Tyrone, was the sale of a 170-unit Class A property that sold for $161,000 per unit, which, he says, “for the time being is the high watermark here.”
When asked about the buyers in Nashville, Tyrone points out that there are out-of-state players taking a look at Music City.
“Nashville is on the radar screen for a lot of people,” he says, pointing out that Forbes recently named it No. 3 on its list of the next boom towns in the U.S., based on factors such as job growth and demographics. Forbes mentions the city’s low housing prices and pro-business environment as reasons for ranking it so high. (According to the U.S. Bureau of Labor Statistics, Nashville-Davidson-Murfreesboro-Franklin reported an 8.4 percent unemployment rate in July, down 50 bps from the month prior.)
“It’s a secondary market that people can still get attractive returns, compared to New York or Washington, D.C.,” notes Tyrone.